real/diaBlog - because real estate needs to change

Top Ten Reasons I Love Short Sales

Don't get me wrong, I don't like the idea of a short sale.  The thought of people losing hundreds of thousands of dollars on the American Dream of homeownership (isn't that what NAR advertises) is horrible for the economy, horrible for neighborhoods and will leave scars for many years to come (way to go Dale). 

But as a real estate professional who has been through the ups and is going through the downs, short sales represent an amazing opportunity.  And here are the top ten reasons why....

10.  They are everywhere.  As an agent working with buyers, there is a ready supply of short sales to choose from at very good prices.

9.  Lazy agents hate them.  And that means competition is low for listing them as well as for buying them.

8.  Inept agents screw them up.  You have to be organized and thorough as well as patient with short sales and these are not qualities that most agents posess.  But I hired an assistant that loves this kind of work.

7.  Sellers don't fight the price.  When the bank is taking the hit, most sellers have no problem getting to the right price.

6.  Short sales are here to stay.  With prices down 30% or more in most areas of the country (including my marketplace of Loudoun County), most people who bought or refinanced and used their house as an ATM during the last 6 years are potential short sales.  And prices won't be bouncing back anytime soon.

5.  Banks agree to 6% in most cases.  After years of fighting tooth and nail to make 4.5% and give 3% to the buyers agent, it is nice to get paid for the 30 hours of work I do to get a short sale approved.

4.  The alternative is Foreclosure.  And that is way worse than selling your house short.  Most people can get another home loan in 18-24 months if they work at it.

3.  Short Sale Buyers love the deals they get.  It takes a lot of patience and hand holding and waiting but once they settle, buyers are very happy.

2.  Debt relief for 10 cents on the dollar.  If done correctly, a seller can eliminate all the debt associated with the home for as little as 10 cents for every dollar that they owe.  Most banks will be happy to get that on a worthless second loan.  And the relief that comes with eliminating that burden is huge.

1.  Sellers always appreciate what you do.  I have sold many homes short and worked a minimum of 30 hours on each one.  I send 100 page faxes on a regular basis.  I spend hours on hold.  I fight with indifferent employees of banks and incompetent agents.  But the appreciation I receive from the sellers at closing is worth it.  And they always seem to have referrals.

But Do You Even Sell Real Estate?

In the past couple of months I have attended seminars given by other real estate professionals and I have been asked to sign up for other seminars given by industry professionals.  The subjects have ranged from social networking and technology to short sales, listing presentations and market conditions. 

After one of these seminars I went back to my computer and looked up the names of the expers on the panel and pulled up their production for the past 15 months.  Turns out that 4 out of 5 experts on the panel have sold 5 homes or less in the past 15 months.  And one of the experts had sold no houses whatsoever.  Now don't get me wrong, they probably know a lot about the the topic they are talking about.  But there is a huge difference between knowing about something and actually being able to put it into practice.

And I think that in the world of real estate the difference between reading about a technique or talking about how to do something and actually being able to apply it to a real life real estate transaction is much wider than people would have you believe.  And I think the lack of actual sales by experts is indicative of this gap.

I would therefore encourage you to question the abilities of the experts you are relying on to teach you how to apply their knowledge to the actual sale of real estate.  I would encourage you to ask for proof of their abilities.  I would encourage you to research their track records and claims to see if they are able to put into practice the skills and techniques and tools they are asking you to use to sell real estate. 

Brokers Suck, Retirement Plans are Ponzi Schemes and Other Tidbits

Jolenta Averill wrote a great post over at Bloodhound about Big Brokerage and how they take and take and take from the agents and give very little in return.  I agree wholeheartedly.  I quit my big brokerage firm (Keller Williams) in December 2007 and couldn't be happier.

Brian Bolero writes a good article about how technology has essentially changed nothing in the world of real estate when it comes to commission rates, fsbos and approval ratings.  Makes you think.

Not that this has anything to do with real estate but if pension plans such as social security and state pension plans like New Jersey have less in their accounts than they owe, isn't that a form of a Ponzi scheme.  I think the people in charge of those programs should be put in jail just like Bernie Madoff, because one day they will run out of money and the people that put their money in will have nothing.  It is inevitable.

I have been working on a digg site for real estate called realdiggity.  Hopefully you find it a good source of real estate news, blogs etc.  I welcome your participation.  It is still in the development stages but I think you can send your clients there to keep up on stories that will direct influence their decisions when it comes to real estate issues.

Some quick thoughts on a sunny Saturday in Loudoun County Virginia.

Attention Agents - 3 Steps to REDUCE YOUR TAXES

Today is April 16th, the day after Tax Day.  And if you are a real estate professional, chances are you had to write a check to the Department of the Treasury because you didn't pay enough of your quarterly estimated taxes or you didn't pay them at all.  I have done this before and it is not fun.

But this year is different.  I actually paid my taxes on time.  I paid almost exactly the correct amount.  

And the I paid less in taxes this year than any other year before.  And no, not because I made less but because I did three very important things.  

MEET WITH A TAX ADVISOR

Last year about half way through the year I decided that I didn't want to pay as much in taxes.  The first step was to meet with a tax advisor and a good bookkeeper.  I explained to them my business, showed them previous taxes and asked them what they could do and I could do to reduce my tax rate and improve my planning.  Just like homeowners should hire a real estate professional to sell their house, a real estate professional should hire a tax professional.

INCORPORATE

The first thing the tax advisor told me to do was incorporate.  This would allow me to drastically reduce my self employment tax which always seemed to be the bulk of my tax bill.  Incorporating will also allow you to write off a lot more of your expenses that have to do with your real estate business.  Incorporating my business allowed me to reduce my tax rate from approximately 20% last year to 8.7% this year.  If you are not paying less than 10% in taxes and you are selling real estate as a full time professional, you are paying too much.

KEEP BETTER RECORDS

This was the hardest thing for me to do so I hired someone to do it on a monthly and quarterly basis.  I bought the software and I send them all my bills, receipts, account statements and anything else that has to do with my business.  They prepare everything and I get the reports.  Not only does it allow me to spend more time on my real estate business but it allows me to focus on making my business more efficient.  It allows me to see where the money is spent and how the money comes in.  It allows me to better plan.  A good bookkeeper is relatively inexpensive and worth every penny.

These are the things I did to reduce my taxes and by no means is this tax advise.  But you might want to look into a couple of these things if you want to pay less next year to the government and keep more for yourself.

Government Statistics are Misleading - Pass It On

Here is an excerpt from an excellent article that explains how misleading (and negative) the economic statistics that are released by our government are.  This is a must read for anybody concerned with how these reports are affecting their buyers and sellers and the overall sentiment of the American consumer.

It should be said plainly that there is no such thing as a trade deficit. It is a myth. For one, countries don’t trade; instead people trade. When we consider it in that light we must conclude that rather than deficits, individuals are constantly exchanging what they deem personal surplus for something they don’t have but want.

Couple this distribution of misleading statistics with the fact that headlines can make us panic when there is no real reason to and it makes for the perfect storm in the minds of the American consumer.  No wonder they don't want to buy houses, make investments or otherwise improve their situation at the most opportunistic times. 

Government Confirms What I Said 11 Months Ago - WE ARE IN A RECESSION

It took the National Bureau of Economic Research 12 months to finally crunch the numbers but they finally confirmed what I announced on January 17th of this year.  The US Economy has been in a recession since December of 2007.  I made the announcement in my post dated January 17th, 2008.

Every once in a while I get it right.

That being said, all the elements that were in place at the beginning of the year have only gotten worse as the year has rolled on.  Unemployment is getting worse, the financial industry is in upheaval, real estate is still dragging down the economy.  There really isn't much to indicate the recession is going to end soon. 

White Label Brokerage vs. Big Brokerage

I quit working for a big brokerage firm last year when I realized the efforts of the national brokerage firm as well as the local office I worked in were returning less and less qualified leads. 

There were five sources of income this brokerage was taking from my commissions.  And each piece was becoming less relevant and more punitive as the year wore on.  Entire areas of online marketing were being ignored, traditional marketing was being scaled back and no effort was made to offset the drop off in qualified leads, prospects or traffic.

In the meantime, my efforts to create an online presence and social media footprint were starting to bear fruit in the form of local exposure, increase blog traffic, qualified leads and even clients.

The four fees I paid were 1. Commission Splits,  2. Corporate Fee 3. Consortium Fee (fancy name for technology) 4. E&O Insurance.

So at the end of the year when I looked back at the return on investment of these 4 fees, I came to only one conclusion.  The ROI was almost nothing and what little return I was getting for the one fee that did have a return was deteriorating quickly.  The corporate fee was going straight to Texas to paid for the CEO to write books that he could sell  back to the agents in the company.  The consortium fee paid to build a set of technology features on a website that had no traffic, no SEO and no hope of ever generating a lead to an agent of the company.  And the split I was paying had become out of line with the flow of leads, prospects and potential commissions.

So I took a leap and joined a small brokerage that charged me none of those fees.  I only paid a small fee to clear the transactions that I complete.  And I was free to brand myself (and now my company) as an expert in my local market.  It is a "white label brokerage" that allows me to build my own company under the umbrella of their administration and brokerage services.  It sets me free to do what I do best and it will allow me to reap the rewards of my efforts directly.  I am no longer paying for services I don't want.  I don't pay for misguided efforts of a corporate monolithe that has become irrelevant in today's fast changing real estate market.

And I am not alone in my evaluation.  Many agents have come to the same conclusions as I have.  The question is whether or not this "white label brokerage" model will become the next generation of brokerage.  Will enough of these progressive agents be willing to band together under a common "white label brokerage"?  Will a white label brokerage created in a form similar to Realogy's model become a player in tomorrow's real estate brokerage landscape?

I am hoping so.

Increase Your Income....Avoid Other Agents

If you are a real estate agent that relies on transactions to make a living, the less time you spend talking and socializing with other agents, the more money you will make.

This rule holds especially true for other real estate agents in your immediate area and most certainly agents in your office.  Unless you are a new to the business or you are recruiting for a position on your team, there is very little reason to spend much time at all with other agents.  Here's why:

• Other agents don't give you referrals
• Other agents don't give you leads (that will buy a house)
• Other agents talk about all their problem clients
• Agents hanging around the office talking are not top producers
• Mediocre agents love to talk with other agents

The next time you find yourself hanging out with other agents think about how much you could be doing to further your career by generating new business or working your sphere of influence for referrals or writing a blog post or working on an association committee or something else much more productive.

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Is Wells Fargo the Best Run Bank in America?

After watching the mortgage meltdown over the past 12 months, it seems that only one bank has a managment team that knows what it is doing:  Wells Fargo.  Just take a look at the recent news reports from the major players in the mortgage lending industry and you will see what I mean.

Freddie Mac chief ignored warning signs

Indymac taken over by government

HSBC earnings down 29%

JP Morgan earnings down 53%

Bank of America earnings down 41%

But during the same time these banks were going under or fighting to stay afloat or reporting horrible earnings reports, Wells Fargo reports it will increase its dividend.  The bank still has some problems with bad loans and other issues, but nothing like the mess the other banks have made for themselves.

Stumble It!

Are Foreclosures Listing Agents Leaving Thousands on the Table?

During the current real estate bear market, banks have been saddled with thousands of properties that they do not want.  They call these properties REOs which stands for Real Estate Owned.  In previous market downturns, banks handled the sale of most of their REOs themselves because there was no internet and the multiple listing services were not as prevelant a marketing tool as they are now.  But during this market banks have turned over a substantial amount of their assets over to real estate agents that specialize in selling REOs.

These agents have made the right contacts at the banks and/or with asset management companies that are handling the properties for the banks and have become the agents to sell the properties in their respective markets.  They have also become familiar with the complicated and inefficient systems put into place by the banks/asset managers.  These systems create unimaginable paperwork, delays and other ridiculous business practices that are very difficult to understand and even harder to explain.

But once an becomes a chosen agent of the banks and puts into place the systems needed to handle foreclosures, an steady supply of listings are fed to the agent without any additional outlay of advertising dollars or time.  The listings are sent via email through online sites and the only pre-marketing work an agent has to do is prepare a market analysis of the property.  And once an agent gets properties from a bank/asset manager the number of listings received can be easily increased just by increasing the area the agent in willing to cover.

And here is where the problems begins.  Agents are taken on bigger and bigger geographical areas and growing their listings inventories to larger and larger sizes but not increasing their staffs sufficiently to handle the ever increasing work load.  In my marketplace of Loudoun County Virginia, I continuously see a handful of agents handling the majority of the foreclosure properties. 

And the past 4 months I have had buyers submit numerous contracts on foreclosure listings without ever receiving a call back from the listing agent.  Not a courtesy call to say they received the offer, not a call telling me that they have multiple offers and not a call saying whether or not my clients' offers were ever accepted.  Voicemails go unanswered, emails asking for a reply are left unopened.  And the homes stay in the MLS as active for weeks after I have submitted a full price offer.

The latest offer I submitted for a client was yesterday.  It was on a property that I called on Sunday but never received a call back.  I sent an email and early Monday morning I was told the house was fully available.  I sent in our full price offer 4 hours later.  This morning I received an email from a completely different agent saying the bank had chosen another offer.  WHAT?!  My client was willing to go higher in price (significantly) but we were never given the opportunity because we had no idea their was another offer. 

So how much money are these agents leaving on the table?  How many other times have buyers been willing to pay more for a house but never got a chance?  In this particular instance it was $20,000.  Will the bank ever find out?  No.  Does the agent care?  No.  Is there a problem with this scenario?  Most definitely.  Will it be fixed?  Doubtful. 

This practice is truly frustrating for me as an agent representing a buyer.  My client is left to wonder if I was doing my job and providing them with all the necessary information.  Fortunately my client is hearing the same things happen to his friends that are trying to buy foreclosures in other areas around Washington DC.  And if you haven't yet experience this type of attitude by the foreclosure listing agents in your area, just wait until the buying activity heats up just a little and see what happens.   

Stumble It!